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Trends 2010 Year-End Update: Securities Class Action Filings Accelerate in Second Half of 2010; Median Settlement Value at an All-Time High

14 December 2010
By Dr. Jordan Milev, Robert Patton, and Svetlana Starykh

The pace of US federal securities class action filings accelerated in the second half of the year and filings are on track to exceed last year's total, according to this edition of NERA's semi-annual study. The study draws from more than 15 years of NERA research on case filings and settlements in securities class actions, and includes data on filings and dismissals through 30 November 2010, and settlements through 31 December 2010.
 
The latest edition shows that filings are projected to reach 239 cases by year's end compared to the 220 class action cases filed in 2009. Over the course of 2010, securities class actions stemming from the global credit crisis have continued to be filed at a slower rate than observed in 2008 and 2009. Through the end of November, there have been only 31 such cases filed in 2010 compared to 57 filed in 2009 and 103 in 2008. While the pace of credit crisis filings has declined, these cases have been offset by a resurgence in a broad range of other types of filings, including undisclosed product and operational defects, breach of fiduciary duties, and accounting improprieties. Companies in the finance sector continue to be a target, though more than half of the 2010 filings against finance sector companies appear to be unrelated to the credit crisis.
 
The median settlement value, an indicator of the size of a typical settlement, was $11.1 million in 2010. This value is over 30% higher than the 2009 median settlement and this is the first time ever that the median has exceeded $10 million. Average settlements for securities class actions reached a new record in 2010. The average settlement was $109 million, well above the previous high of $80 million in 2006. Excluding outliers of cases over $1 billion and 309 small IPO laddering settlements, the average settlement for 2010 was $42 million -- in line with last year's record high.